Answer to Question #106837 in Microeconomics for Abongile

Question

A firm’s short-run average cost curve is U-shaped. Which of these conclusions can be reached regarding the firm’s returns to scale ?
1) the firm experiences increasing returns to scale
2) the firm experiences increasing, constant and decreasing returns in that order
3) the firm experiences first decreasing, then increasing returns to scale
4) the short-run average cost curve reveals nothing regarding returns to scale
5) None of the above options provides a correct answer

Answer 1

2) the firm experiences increasing, constant and decreasing returns in that order